Emerging trends & compliance challenges in pandemic

Due to the outbreak of coronavirus, millions of people have locked themselves inside their house not because they are well conscious and responsible citizens rather they are forced to. The world has seen a lot of dark sides of the economic impact in the coronavirus but as life continues many people who are blessed to have a stable job are now exploring the bright side of coronavirus by giving a new dimension to the familial bonds by working from home. The Financial industry also has seen a fewer number of AML cases & fines from regulators as COVID19 completely disrupted demand of illicit drug trafficking and successive money laundering measures.

The other aspect, the terrifying one, substantially marginalized people for whom ‘No work means no pay’ continuing the social distancing against the invisible virus is nearly impossible. Also within the month of locked down, millions are jobless and consequentially already ran out of savings. The persistent locked down has impacted the economy, with Businesses cutting jobs as demands of non-essential goods & services have been drastically reduced. Study shows that an increase in the number of job cuts and subsequent unemployment can lead to a growth of unprecedented criminal activities. The world has already witnessed the far-reaching crisis and likely to see unprecedented pressure than usual in fighting financial crimes.

Emerging trends in Pandemic & Afterward:

Following are a few emerging trends that will be prevailing in post COVID world as well:

1. Regulators around the world will be more flexible to encourage Banks to provide financial services in digital space so that customers can avail desired financial services by maintaining social distance.
2. A huge number of AML reporting backlogs like to increase in the Banks due to a shortage of staff & challenges in working from home.
3. KYC compliance will reach its new heights as Banks will adopt the E-KYC approach to digitally on-board customers & the Due diligence approach will be more simplified as per the Risk-based approach FATF allows.
4. Fraudsters will be more involved in money mule scheme, cybercrime and the world is going to see abuse of financial support / stimulus package in developing countries.
5. Banks likely to face challenges in the supervision of AML obligations as criminals will attempt to bypass CDD measures in the context of health emergency in COVID Times.

Challenges in AML / KYC Compliance:

AML/KYC compliance has seen it’s intensity and discussed worldwide only since last decade, the profession itself is comparatively new, even the most experts working in the field lack real pandemic or a skyrocketing unemployment experience to completely understand pandemic fraud behaviour profiling. The fraud schemes are capitalizing the coronavirus anxiety and insecurities to mass people, hence institutions must detect potentially suspicious activity and monitor emerging trends that may target them and their customers in Pandemic and afterward. Financial institutions need to re-assess vulnerabilities in exposed areas, increase awareness, re-assess & develop compliance strategy to minimize the impact.

Needless to mention, the outbreak has disrupted access to traditional banking channels, likewise traditional money laundering measures are shifted to other schemes in the pandemic.  AML professionals all around the world must rethink and redesign the AML monitoring system since only system based traditional behavioural monitoring system keeps financial institutions at a disadvantaged position and subsequently makes more vulnerable.